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Sunday, April 27

27th Apr - W/E: Markets & Economics

Previously on MoreLiver’s:

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Global Macro Part 2: Commodities Short Side of Long
Maybe… just maybe… US equities are not going to be the best performer this year! * Annualised performance of major assets around the world… * Commodity index broke out of its long downtrend in early 2014! * Some commodities continue to struggle despite a recent rally * Industrial metals are breaking out after a three year bear market!

Popular Stocks Stink Millennial Invest

Home is where the money isFT
Savers have embraced a little bit more investment tourism this side of the world’s financial crises, but home bias still rules when it comes to stock markets.

The Ubiquity of “Lost Decades”Above the markets
10-year periods that suffered negative equity returns, a “lost decade” actually happens fairly frequently

Asness on the central paradox of efficient marketsForbes
Efficient market? Baloney, says famed value- and momentum strategist Cliff Asness, Chief Investment Officer at AQR Capital Management, who sat down with me to discuss his unique quant strategy. A video and transcript of our conversation follows.

"Smart beta" and factor investing questionsHumble Student
This is another of an occasional series on how good quantitative investors use both the left and right brains to create robust investment processes.

Persistent noise trading and market
Since capital flows to and from hedge funds are strongly related to past performance, an exogenous liquidity shock can trigger a vicious cycle of outflows and declining performance. Therefore, ‘noise’ trades – usually thought of as erratic – may in fact be persistent. Based on recent research, this column argues that there can be multiple equilibria with different levels of liquidity and informational efficiency, and that the high-information equilibrium is unstable. The model provides a lens through which to interpret the ‘Quant Meltdown’ of August 2007 and the recent financial crisis.

Berkshire Hathaway: Playing out the last handThe Economist
Warren Buffett’s 50 years running Berkshire Hathaway have been one of business’s most impressive winning streaks. How will it end?

Book Review: Big Ideas in Macroeconomics: A Nontechnical ViewEuropp / LSE
In this book, Kartik B. Athreya aims to offer a nontechnical description of prominent ideas and models in macroeconomics, arguing for their value as interpretive tools as well as their policy relevance.

Long- and Short-Term Unemployment Have Similar Inflation Impact: Fed PaperWSJ

Time to stop following defunct economic policiesReuters
Only in economic forecasts -- not in the real world -- is it true that any policies the central bank chooses to follow lead automatically to full employment.

Martin Wolf on funny money creationFT
Anyone who has speculated about the significance and effects of quantitative easing in the last five years should probably have a read.

Toward a run-free financial systemJohn Cochrane
I suggest that Pigouvian taxes provide a better structure to control debt issue than capital ratios; that banks should be 100% funded by equity.

100% Reserve Banking — The HistoryHouse of Debt
So both John Cochrane and Martin Wolf are advocating 100% reserve banking. If these two agree on anything, it’s worth taking seriously!

Is A Banking Ban The Answer?Krugman / NYT
Wolf misses shadow banking, while Cochrane is highly interventionist…Broader issues of excess leverage, and the resulting balance-sheet problems of many households, are key. And neither 100% reserves nor a repo tax would have addressed that kind of leverage.

Reading list (fifth item)Marginal Revolution

  PIKETTY’S BOOK ‘Capital in the Twenty-First Century’
First Thoughts on PikettyGregg Mankiw

The Piketty PanicKrugman / NYT

Stiglitz. Krugman and Durlauf in discussion with PikettyYoutube

Piketty Is Right Robert M. Solow / New Republic

Solow, Piketty and the problem with bank bailoutsThe Telegraph

Piketty for DummiesEconoSpeak

Today’s Wonky Elite Is in Love With the Wrong French IntellectualDaily Beast
Poulos Gets Piketty—and Tocqueville—WrongDaily Beast

The Neo-Fisherite RebellionNoahpinion
The rebellious idea - which I've decided to call "Neo-Fisherite" - is that low interest rates cause deflation, and high interest rates cause inflation. If this is correct, then not only is the Fed massively confused about what it's doing, but much of the private sector may be reacting in the wrong way to monetary policy shifts.

Noah Smith on the Neo-FisheritesMoney Illusion
Let’s blow the neo-Fisherite model right out of the water.

If the Fed had a meeting, how would that affect inflation?Money Illusion

Targeting wage inflationMainly Macro
My own argument for targeting wage inflation has been a combination of theory and practicality

A. Gary Shilling: The Economic Monster Called DeflationView / BB